1

Chapter I

Introduction to Talent Management Strategies and Challenges

This chapter presents an Introduction to Talent Management

practices followed in the Indian IT and BPO industry, Meaning and

definition of Talent Management, concept of talent DNA model. Also, the

focus and the importance of talent management along with the

conceptual aspects like talent management strategies in global era,

importance of organization culture, role of Performance Management

System in the organizations in relation to talent, work life balance and its

application, retention management and its strategies are mentioned in

this chapter.

1.1 Talent Management: An Introduction

In today‘s challenging business environment of going global and

competition becoming intense, organizations have mounting pressure to

perform better than before. Over the years, creation and preservation of

knowledge has become a key tool in accelerating competitiveness and

enhancing organizational capabilities to respond to market changes

(Bryan, 2004)1, wherein employees‘ skills and personalities are

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appropriately deployed to optimize performance, is a critical and difficult

task. Furthermore, identifying and developing executives who have

leadership potential, like every other vital strategic function, is a

demanding process that is equal parts of Arts and Science (Judy Klein

and Stephen A. Miles, 2003)2.

To carry out this mission, organizations should develop and deploy

talented people who can articulate the passion and vision of their

organizations. Though operating excellence, technical competence,

marketing savvy, energy and drive are always important, talent-intensive

organizations also require soft skills that facilitate execution across

departments.

Not only Software and BPO Companies, no organization can rest in

peace under the assumption that once they have recruited the employee

in place, their job is done. The real challenge that is faced by these

industries is not hiring the right person for the right job, neither their

Performance Management System, nor their Work Climate nor Culture,

but in retaining the employee. It is proven beyond argument that it is the

people who make or break the organization.

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Managing the talent of key employees is critical to achieve the

success in long-term by any organization.

Talent management involves individual and organizational

development in response to a changing and complex operating

environment. It includes the creation and maintenance of a supportive,

people oriented organization culture.

1.2 Meaning of Talent Management

The term Talent Management is being used to describe sound and

integrated human resource practices with the objectives of attracting and

retaining the right individuals, for the right positions, at the right time.

Organizations are run by people, and the talent of these people will

determine the success of organizations. So, talent management is

management‘s main priority (Michaels, Handfield-jones, H. & Axelrod,

2002)3. Today‘s businesses face increased global competition, shifting

markets, and unforeseen events. No wonder they are finding it more

difficult than ever to attract, develop, and retain the skilled workers they

need (McCauley & Wakefield, 2006)4. Talent management is ―a conscious

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and deliberate approach undertaken to attract, develop and retain people

with the aptitude and abilities to meet current and future organizational

needs‖ (Derek Stokley)5.

Talent management, also known as Human Capital Management,

is the process of recruiting, managing, assessing, developing, and

maintaining an organization‘s most important resource – i.e. its people

(Bhatla, 2007)6. Talent management initiatives must involve dialogue and

engagement with business in order to hire, retain and develop the talent

that is needed to achieve the business goals. (HR Focus, 2008)7. Talent

management involves individual and organizational development in

response to a changing and complex operating environment. It includes

the creation and maintenance of a supportive and people oriented

organization culture.

Talent Management refers to identifying the employee talent and

utilizing it effectively and retaining the same talent to compete with

similar organizations. Talent is a competitive advantage. According to

(Christonel, 2002)8, ―New Value Systems will converge and reinforce each

other, creating a company capable of winning big.‖ Most of the

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organizations fail to identify the suitable candidates at the first place,

and in case they do identify they fail to retain them.

As per knowledge infusion, ―talent management‖ is defined as ―the

integrated process of ensuring that an organization has a continuous

supply of highly productive individuals in the right job at the right time‖.

1.3 Need for Talent Management

Talent Management is on HR professionals‘ minds these days, as

HR works to obtain, retain and develop manpower. For talent

management to be effective, what is important is to hire employees who

seem to be the best fit in the organization. Organizations are taking steps

to manage talent most effectively and also to develop their own employer

brand. These brands simplify decision-making and communicate the

value they create for their customers. Likewise, employees also identify

themselves with certain organizations (Shravanthi and Sumanth, 2008)9

especially in the light of forecasted labour shortage. Organizations that

formally decide to "manage their talent" undertake a strategic analysis of

their current HR processes. This is to ensure that a co-ordinated,

performance oriented approach is adopted.

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Quite often, of late organizations are adopting a Talent

Management approach and are focusing on co-coordinating and

integrating various aspects, such as:

Recruitment, Retention, Employee development, Leadership and

"high potential employee" development, Performance management,

Workforce planning and Culture.

The Researcher found from the present study that, there is a

tremendous change in human resources in the past decades. The

reasons behind are the changes in technology and global economic

environment. Even though organizations are aware of the need for

human talent they were neglecting it all these years without giving

comprehensive outlook.

The novel Economy is a different place from the aged one and

requires a shift in value systems to become accustomed. To deal with

this changing world the present age bracket needs to be aware of its

contributions, developments and ability to manage both the present and

future.
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Therefore, it is important for the organizations to develop adequate

and appropriate plans and put in efforts to attract the best pool of

available candidates, and also to nurture and retain the current

employees.

1.4 Talent Management Models

Researcher found in the study that, to manage talent effectively,

organizations have to follow certain models which help them in smooth

functioning. The following are the two models identified in the study

which are explained in detail:

1. DNA model

2. Peter Cappelli‘s Model

Talent management is a continuous process that plans talent

needs, attracts the very best talent, speeds time to productivity, retains

the highest performers, and enables talent mobility across the

organization. In order to successfully balance the notion of talent supply

with business demand, there must be a match between capabilities and

needs.
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Knowledge infusion was approached to different talent

management centers on the concept of ―talent DNA‖. In order to

successfully balance the notion of talent supply with business demand,

knowledge infusion breaks down the talent DNA model into three parts.

Talent management, on the other hand, focuses on enhancing the

potential of people by developing capacities. Capacities are the basic

DNA of an organization and also of individual potential. In fact, the

following appropriately describes the role of talent management:

Table 1.1

Talent DNA Model

D N A

Point of Departure Navigation Point of Arrival

Translating Aligning individual Clear understanding of

organizational vision values and vision with the varied roles within
into goals and organizational values the organization and
mapping the required and vision. appreciation of the
level of capacities and value-addition from
competencies to self and others leading
achieve goals. to building a culture of
trust, sharing and
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team orientation.

Assessment of talent to Enhancing capacities Individual growth to

profile the level of to learn, think, relate meet and accept
capacities and set of and act through varied, incremental
competencies development and transformational
possessed within the initiatives. roles in an overall
organization. scenario of
acknowledged need for
change.
Gap analysis and Helping individuals Developed individuals
identification of realize their full enabling breakthrough
development path. potential through performance.
learning and
development.

1. Skills and capabilities required throughout the organization.

2. Skills and capabilities must be able to relate to job position.

3. Organizations must be able to hire the right people.

With all three components in place, organizations can apply the

talent DNA Model to virtually any HR supply and demand process -

whether it‘s recruiting, on boarding, staffing, or development.

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2. Peter Cappelli’s Model: A Wide Outlook of Talent Management

Talent management is simply a matter of anticipating the need for

human capital, and then setting out a plan to meet it. In addition to

working on effective policies for recruitment, selection, performance

management, recognition and rewards, education and development and

the like, talent management exists to support an organization‘s overall

objectives. Peter Cappelli has proposed a talent-on-demand framework

similar to just-in-time manufacturing for the development of empire. This

approach to managing talent uses four particular principles drawn from

operations and supply chain management. They are as follows:

TABLE No 1.2

Peter Cappelli’s Model

Principle 1 Principle 2 Principle 3 Principle 4

Make or buy to Adapt to the Improve the Preserve the

Manage Risk Uncertainty in Return on Investment by
Talent Demand Investment in Balancing
developing Employee-
employees Employer
Interests
A deep bunch of This principle Get employees Talent
talent is tells about to share in the development is
expensive. So, managing the costs of a perishable
companies talent demand. development. commodity. To
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should Bring That might reserve the

undershoot employees from mean asking investment in
their estimates all the them to take on development
of what will be functions additional efforts as long
needed and together in an stretch of as possible,
plan to hire 18-month assignments on balance the
from outside to course that a voluntary interests of
make up for teaches general basis. Maintain employees and
any shortfall. management relationships employer by
Firms should be skills, and then with the former having them
thoughtful send them back employees in share in
about their to their the hope that advancement
precious functions to they might decisions. To
resources in specialize, return retain talent,
development of instead of someday, organizations
organization. putting them as bringing back must elevate
Talent Management the investments talent as a
Management is Trainees in their skills. priority
an Investment, through a throughout the
and not an three-year company by
Entitlement. functional developing a
So, every program. sound employee
organization value
should think proportion.
carefully the
requirement of
talented people.
Peter Cappelli (2008), ―Talent Management for the Twenty First Century‖, Harvard Business
Review, South Asia, pp. 60-69.

Therefore, it is important for the organizations to develop adequate

and appropriate plans and put in efforts to attract the best pool of

available candidates and the nurture and retain the current employees.
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1.5 The Focus of Talent Management

Individuals get motivated by different value propositions. To keep

the workforce motivated, organizations today have to adopt certain

practices which are as follows:

1. Capacity to learn [measured as Learning Quotient (LQ)]

Enhancing an individual‘s capacity to learn improves the person‘s

awareness towards his work.

2. Capacity to think [measured as Conceptual Quotient (CQ)]

Enhancing an individual‘s capacity to think helps the person not only

learning for a higher level, but also improves Creativity, Analysis and

Judgments.

3. Capacity to relate [measured as Relationship Quotient (RQ)]

Another important capacity for an individual is to be able to relate to

his learning and thoughts. This comprises of Listening, Empathizing

and Trusting.

4. Capacity to act [measured as Action Quotient (AQ)]

Action is an individual‘s ability to enact his intentions - ability to

organize his time and resources in order to convert intentions into

reality. Implementing includes focus on the right process. Performing

under pressure is another component which talks about ability to

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work under any circumstances.

Thus:

(LQ + CQ + RQ + AQ) X Values = Talent

1.5.1 Talent manifests into performance as follows

Talent
+
Organizational Vision/Mission/Strategy
+
Skills & Competencies
+
Position & Configuration
+
Prospect
+
Support & Acknowledgment
+
Training & Development
+
Instruction
+
Action Plan & Goals
+
Resources

Performance Management System

Talent Performance
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Thus, the sphere of influence of talent management not only

focuses on development of individual‘s intrinsic capacities, but also on

culture building, which provides the other elements, listed above for

manifestation of talent into performance.

1.6 Talent Management Best Practices in Global Era

Every organization struggles hard to meet the global market

competition for its success, and hence the War for Talent. Creating

enriching workplace experiences to attract and retain the high caliber is

needed. Therefore, it is important for organizations to moot retention as

first priority and recruitment second place.

There are several key practices to be followed by organizations.

They are as follows.

1. Experience based learning: Most of the organizations define Job

Description to their employees very narrowly and they have no access

with others, which makes them boring and monotony in their work. If

the organizations relax them for some time and have exposure to

innovative things, they will give rise to the increased output, as well as

retention.
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2. Mentoring: A particular form of relationship is designed to provide

personal and professional support and guidance to an individual,

wherein specific issues and ideas can be discussed and developed.

Mentoring is required to a new employee, so that, organization can avoid

job hopping.

3. Business focus: Organizations are linking key business initiatives

with talent management principles to rapidly address new business

opportunities and challenges. After years of paying lip service to the

concept, now they have realized that ―their workforce is their greatest

asset‖. By increasing productivity and motivating workforce behavior,

talent management leads to higher levels of organizational performance.

4. The Swift in Workforce: Today‘s greatest challenge lies in aligning

the right people with the right skills and identifying the competencies of

the workforce. Organizations need to forecast the current workforce and

assist in enabling the execution of business plans that manage the

supply and demand of talent.

5. Developing Business Leaders: Developing leaders with a shared

vision can empower the workforce, whilst instilling organizational values

and personal accountability, by understanding the macroeconomic

trends and role of emerging technologies.

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6. Employee feedback is an effective tool: Organizations have to

emphasize on feedback from the employee about various aspects of the

organizations, e.g. Corporate Culture, Work Environment, Training

Programs, Compensation and Supervision, etc. These feedback surveys

offer invaluable insight into employee attitudes and opinions that can

ultimately affect employee retention.

7. Interaction with management is imperative: For effective talent

management practices, it is essential to involve the top management and

practice it at the strategic level. For e.g., Infosys, where the HR

Department is in constant touch with the Board of Directors about talent

development.

8. True value of HR is Return on Investment (ROI): ROI allows

calculating of a payback period. It can be used to revolutionize and

transform the human resource function in order to bring more value

throughout the organization. It also helps in comparison of one

department returns with the other department.

9. Create Teams of Businesses with HR and IT employees who ―own‖

and ―manage‖ the talent management processes. These teams stay

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engaged over a period of years to make sure that the involved processes

are refined, managed, measured and improved.

1.7 Role of IT - ITES in India

The Indian IT Industry has been making a marked shift by offering

services in IT consulting, system integration, remote infrastructure

management, network consulting, KPO and integration processing

services.

The IT R&D services currently account for more than 15 percent of

the total IT exports. India‘s strengths have been its large growth

potential, increasing outsourcing trend, large talent pool availability,

high quality educational infrastructure, low operating costs, R&D

strengths, and the government initiatives. Around 175 of the Fortune

500 companies have R&D operations in India.

A vast network of state-owned national research laboratories

provides world-class support. The IT-ITES Industry‘s contribution to the

Indian GDP had increased from approximately 1.4 percent in 1998-99 to

5.2 percent in 2006-07. The IT-ITES industry includes hardware,

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peripherals, networking, training, and domestic and export market for IT

services and software and ITES-BPO.

Department of Information Technology (DIT) fact sheet

Table 1.3

DIT Fact Sheet and Potential Employment

Generation in Indian IT Industry (Year 2008)

Software and Service Sector 2.2 million

ITES/BPO 1.1 million

Indirect 2-3 million

Hardware Sector

Direct 1.6 million

Indirect 3.2 million

Total Employment Generation - over 9 million.

Source: S.C. Poornima*(2008),‖Preferences as a Strategic Approach to Tackle Attrition: IT and

ITES Industry Perspective‖, The Icfaian Journal of Management Research, Vol. VII, No.3, pp. 26-
33.

As per NASSCOM Report, there were already one million

professionals contributing to the growth of IT-ITES industry in 2004-05

and the sector hired an additional of around 1.5 million personnel in

2006. Further, they hired 2.2 million in 2008. In India, manpower has
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been the most crucial resource in the IT-ITES industry. Professionals are

the backbone of any organization. As the demand for skilled

professionals is very high, there is a possibility of moving from one job to

another, one organization to another and one country to another.

Comparing with BPOs, the Software Industry is a little better off in

managing the challenge of retaining the talent. But, the employee is

always threatened in the organization by either Perform or Perish.

Many corporate leaders are using assessment tools to find out

executives‘ assessment, which reflects on an organization‘s talent. They

are as follows:

1. The first dimension measures the organization‘s current and future

strategic needs;

2. The second dimension measures the competition; and

3. The third dimension measures the overall talent marketplace.

With the help of these assessments, organizations lay down the

foundation for winning talent strategy. For putting the right people in

the right positions at the right time, they invariably clarify the processes

that monitor performance and develop capabilities. Assessments also

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allow companies to maximize the value of executive education programs

and creating custom-fit learning strategies for their next generation of

corporate leaders.

Indian BPOs are facing an enormous challenge in reducing

attrition rate and to develop innovative Talent Management initiatives. A

budding industry needs to draw parallels and examples from other

industry practices to meet with the challenges in the competitive era.

There are varied reasons for the attrition rate. Some of them are

as follows:

a) No Career development

b) Night Shifts

c) Monotonous / boring Job

d) Other reasons.

The Researcher found some important above reasons for high

attrition rates, which are pretty steep and are around 40-50 percent.

Currently, it is about 35 percent in non-voice and 45 percent in voice call

centers. About 80 percent of them look for better careers within the
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same industry. Agents want to become team leaders. Team leaders want

to become supervisors. Supervisors want the job of CEO.

As seen from the above, BPO Industry indeed has a huge

challenge before it and its approach has to be proactive and it has to

develop Innovative Talent Management Strategies, in other words a

satisfied employee knows clearly what is expected from him/ her every

day at work. Changing expectations keep people on the edge and creates

unhealthy stress. This creates insecurity and makes the employee feel

unsuccessful. An employee‘s deliverables at work must be

communicated to him clearly and thoroughly. The quality of the

supervision an employee receives is critical to its talent retention.

1.8 Importance of Organizational Culture in value based Corporate

System.

Organizational culture assumes immense significance as a central

theme for attaining competitive advantage. Organizational culture is

hypothesized to play a decisive role in the development of a unique

corporate identity, which in turn provides organizations with the

opportunity to leverage their corporate identity to achieve strategic

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leadership. Cultural influences have a strong bearing on the character

and persona of an organization.

Peters and Waterman (1982)13 have opined that excellent

companies focus on building an enabling corporate culture.

Organizational culture is defined as shared managerial beliefs and

assumptions about employee nature and behavior.

Deal and Kennedy (1982)14 define organizational culture as the

way things get done around here. Schein (1990)15 describes it as a set of

shared assumptions, values, beliefs and expectations shared by

organization members. Ouchi (1981)16 puts it as a set of symbols,

ceremonies, and myths that communicate the underlying values and

beliefs of an organization.

Robbins (1988)17 indicates that it takes a long time for culture to

form and once established it becomes entrenched. Therefore, the culture

of an organization should be treated as an important influence on

employees‘ behavior. Culture conveys important assumptions and

norms governing activities and goals.

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1.9 Role of Performance Management System in relation to Talent

Management System

The Talent Management System (TMS) is an effective tool for

creating a symbiotic relationship between talent and the organization to

dramatically accelerate performance improvements.

Performance management is the process of creating a work

environment to perform to the best of ones abilities. Performance

management is a whole-work system that begins when a job is defined as

needed. A performance management system includes Selection, Job

description, setting performance standards, providing effective

orientation, education, and training with on-going coaching and

feedback. By conducting quarterly performance and rewarding people

for their contribution to organization also helps in their career

development, coupled with exit interviews to understand WHY valued

employees leave the organization. Infosys has a comprehensive and

integrated role-based performance management system. It is a

combination of task and competency evaluation based on predefined

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parameters for each role. This system integrates with the reward systems

as well as with the training systems (Farah Naqvi 2009)18.

1.10 Work-life Balance in relation to Talent Management

There is no agreed definition of work-life balance, but it does

appear that the ‗right‘ balance for one person may differ from the next.

Work-life balance, in its broadest sense, is defined as a satisfactory

level of involvement or ‗fit‘ between the multiple roles in a person‘s life. A

good work-life balance means something simple - to work to support Life,

and not the other way round.

Work-life balance policies can assist employees achieve a balance

between their work and personal commitments. Our work and personal

lives change across the life span with associated responsibilities, and

thus the need for work-life balance policies, change all the time.

1.11 Talent Retention as a challenge.

Recruiting the best and talented employees is one of the most

important HR functions. But, the major duty of and challenge for any

HR Manager is to retain their organization‘s high performers.

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Especially in this Global era, retaining the Human Resource calls

for special skills and strategies. Hence, retaining employees is the key

for any business success. It is a major challenge for organizations to

retain skilled employees once they have been hired and trained. In

addition to reasons like lack of growth opportunities, low pay packages

and inability to adapt to the organization, high turnover has also been

identified as a cause for higher attrition rate. According to studies

conducted by US Department of Labor and Merck (Ken Jacobs, 2007)19,

investing in staff is far less expensive than replacing them, whose

estimated cost is about one-and-a-half years of a departing staffer‘s

annual salary.

Organization of the Thesis

The thesis has been organised as follows:

 The first chapter provides an introduction to the concept of Talent

Management and its need in the organization, talent management

models and its role in the organization with respect to Indian IT and

BPO sectors.
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 The second chapter reviews various research studies in Talent

Management literature with a focus on Strategies and Challenges and

other related attributes like culture, performance management, and

work- life balance and retention management. The main purpose of

this chapter is to identify the gaps in the research based on review of

literature and position the proposed study to address these gaps.

 The third chapter describes the Research methodology adopted for the

study.

 The forth chapter presents the statistical results and analysis

pertaining to Talent Management. This chapter tests the hypotheses

pertaining to the impact of culture, performance management, work-

life balance and retention on talent management.

 The fifth chapter presents the summary of conclusions,

recommendations and implications of the study.

To conclude, largely, superiors are not so open to a new idea that

challenges their thinking. They may even withhold rewards for

exceptional performance. If people do their jobs much better than

expected, they should be rewarded for their performance.